The Cato (CATO) AI Stock Analysis

• Market Cap: $81.08M
• Dividend Yield: 16.55%
• Average Volume (3M): 135.82K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.40
• Revenue Growth: -4.13%
• EPS Growth: -18.26%
• Country: US
• Employees: 7,000
• Sector: Consumer Cyclical
• Sector Strength: 79
• Industry: Apparel - Retail
• EPS (TTM): 0.35
• Shares Outstanding: 17,962,675
• 10 Day Avg. Volume: 330,577
• 30 Day Avg. Volume: 135,818
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.10
• Enterprise Value/Revenue: 0.14
• Enterprise Value/Gross Profit: 0.42
• Enterprise Value/Ebitda: -4.69
• 1Y Price Target: $4.00
• Price Target Upside: -2.68% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 0

• Rating: 54 Neutral
• Price Target: $4.00 ▼(-2.68% Downside)

The overall stock score of 54 reflects significant financial challenges, including declining revenues and profitability, which are partially offset by strong technical momentum. The high dividend yield provides some appeal, but the negative P/E ratio and overbought technical indicators suggest caution. The recent corporate event underscores ongoing operational difficulties.

The Cato Business Overview & Revenue Model

Company Description

The Cato Corporation, together with its subsidiaries, operates as a specialty retailer of fashion apparel and accessories primarily in the southeastern United States. It operates through two segments, Retail and Credit. The company's stores and e-commerce websites offer a range of apparel and accessories, including dressy, career, and casual sportswear; and dresses, coats, shoes, lingerie, costume jewelry, and handbags, as well as men's wear, and lines for kids and infants. It operates its stores and e-commerce websites under the Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro, and Versona names. As of January 29, 2022, the company operated 1,311 stores in 32 states. It also provides credit card services to its customers, as well as layaway plans for customers who agree to make periodic payments. The company was incorporated in 1946 and is headquartered in Charlotte, North Carolina.

How the Company Makes Money

The Cato generates revenue primarily through the sale of women's apparel and accessories in its retail stores and online. The company's revenue model is driven by direct sales to consumers, where a significant portion of its income comes from in-store transactions complemented by e-commerce sales. Key revenue streams include product sales, seasonal promotions, and clearance events that help move inventory. Additionally, The Cato may engage in strategic partnerships with vendors and suppliers to enhance product offerings and leverage exclusive collections, further contributing to its earnings. The company's ability to adapt to fashion trends and consumer preferences also plays a critical role in maintaining its revenue growth.

The Cato Financial Statement Overview

Summary

The Cato faces significant financial challenges across income, balance sheet, and cash flow statements. Declining revenues and profitability, coupled with increased liabilities and negative cash flows, create a precarious financial position. The company must address these issues to improve financial health and sustain operations long-term.

Income Statement

The Cato's income statement shows a concerning trend with declining revenue and profitability. Gross profit margin stands at approximately 32.6% for TTM, but the company has experienced negative EBIT and net profit margins in recent periods. The revenue growth rate is negative, indicating declining sales. This suggests significant challenges in maintaining sales and controlling costs.

Balance Sheet

The balance sheet reflects a moderate level of financial stability. The debt-to-equity ratio is approximately 0.8, indicating a moderate use of debt financing. However, the equity ratio has decreased over time, reflecting increased liabilities relative to assets. Return on equity is negative, highlighting profitability issues. While the company maintains a reasonable level of equity, the increasing liabilities are a concern.

Cash Flow

Cash flow analysis reveals a decline in free cash flow and operating cash flow in recent periods, with negative growth rates. The operating cash flow to net income ratio is negative, indicating cash flow challenges. Free cash flow to net income ratio is also negative, highlighting inefficiencies in cash generation relative to accounting profits. The company needs to improve cash generation to support operations.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	642.95M	649.81M	708.06M	759.26M	769.27M	575.11M
Gross Profit	209.70M	213.37M	243.74M	249.60M	316.21M	141.92M
EBITDA	-18.95M	-6.24M	-3.90M	12.94M	49.25M	-57.94M
Net Income	-25.72M	-18.06M	-23.94M	29.00K	36.84M	-47.48M
Balance Sheet
Total Assets	440.81M	452.36M	486.82M	553.14M	633.77M	591.45M
Cash, Cash Equivalents and Short-Term Investments	79.95M	77.70M	102.95M	128.66M	165.76M	143.93M
Total Debt	132.60M	145.90M	153.12M	174.77M	184.33M	206.74M
Total Liabilities	275.89M	290.06M	294.50M	326.55M	379.57M	344.95M
Stockholders Equity	164.92M	162.30M	192.32M	226.59M	254.20M	246.50M
Cash Flow
Free Cash Flow	-27.21M	-27.62M	-12.05M	-6.06M	55.68M	-44.67M
Operating Cash Flow	-21.58M	-19.75M	477.00K	13.37M	59.79M	-30.71M
Investing Cash Flow	22.30M	28.96M	19.78M	16.02M	-25.33M	64.51M
Financing Cash Flow	-9.33M	-14.05M	-16.13M	-29.28M	-31.80M	-27.18M

The Cato Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 4.11
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CATO, the sentiment is Positive. The current price of 4.11 is above the 20-day moving average (MA) of 3.22, above the 50-day MA of 3.04, and above the 200-day MA of 3.22, indicating a bullish trend. The MACD of 0.30 indicates Negative momentum. The RSI at 74.25 is Negative, neither overbought nor oversold. The STOCH value of 87.12 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CATO.

The Cato Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	61 Neutral	$17.64B	14.17	-5.23%	3.04%	1.43%	-15.09%
DXLG	55 Neutral	$69.51M	26.16	-3.58%	―	-9.85%	-137.20%
CATO	54 Neutral	$81.08M	―	-10.73%	16.55%	-4.13%	-18.26%
RENT	48 Neutral	$22.53M	―	47.49%	―	0.60%	36.38%
TLYS	47 Neutral	$59.40M	―	-47.54%	―	-8.79%	-15.17%
DLTH	45 Neutral	$85.30M	―	-27.53%	―	-4.21%	-292.04%
LVLU	42 Neutral	$10.80M	―	-187.85%	―	-10.68%	-74.47%

The Cato Corporate Events

The Cato Corporation Holds Annual Meeting and Reports Q1 Results

On May 22, 2025, The Cato Corporation held its Annual Meeting where shareholders elected two directors and approved amendments to the Employee Stock Purchase Plan and the selection of PricewaterhouseCoopers LLP as the independent auditor for the fiscal year ending January 31, 2026. In its first quarter report, Cato announced a net income of $3.3 million, a significant decrease from the previous year’s $11.0 million, and a 4% drop in sales attributed to cautious consumer spending and economic uncertainty. The company closed eight stores during the quarter, ending with 1,109 stores in operation.